Send in the clouds

by Edward McGowan

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It seems like lately when people find out that I work for a company that is involved with the internet, they want to know if we are in the cloud yet. My response is usually I was in the cloud before they started calling it the cloud. I guess this is not completely true. What are the differences between a traditional SaaS provider and one that is using the cloud? Here is my definition.

A typical SaaS provider will work with a hosting provider. At a minimum, the hosting provider will provide what is referred to as "Power and Pipe." This means, they will provide power to run your equipment and a connection to the internet. For everything else, you are on your own. This level of service is Co-Location or CoLo for short. At the other extreme is what is called Managed Care. In this arrangement, along with power and pipe, the hardware and monitoring is provided by the hosting company. You essentially lease the equipment you need to run your application. The benefit here is that the hosting company owns the equipment and is responsible for its maintenance, service contracts and software patches. This, of course, comes at a cost.

Cloud providers resemble Managed Care much more than CoLo. There are two big differences. Traditionally, if you contract for Managed Care for a server, there is a physical server that has been assigned to you for your exclusive use. With a cloud provider, you may be getting a Virtual Machine on a server that is used by other customers of the cloud provider. This way, cloud providers can take a large piece of expensive hardware and spread the costs to many customers. It may not make as much economic sense when dealing with servers, but think about large disk arrays or Storage Attached Networks (SANS). The second difference is the cloud providers have built out infrastructure that allows them to quickly add resources for their customers. You can easily add a couple servers to your installation if what it really means is allocating a couple of more VMs. Hardware does not need to be provisioned and built to your specifications in the cloud environment.

So which is right for you? Well, as you guessed, it depends. To the end user, I don't think it matters. A reliable service can be built out using any of the environments. In many cases, it comes down to cost. If you are just starting out, it can cost quite a bit of capital to build out a hosting environment, particularly in the CoLo model. Cloud providers can set you up with application servers and database servers at a much lower cost. They also let you contract for the service in monthly terms, so you can use them 3 or 4 months while you build out other solutions. Cloud environments are also very well suited to an application that has dynamic levels, (or perhaps seasonal levels), of need. Suppose you need three times the processing power, but only for two months of the year. It may be more cost effective to use a cloud provider to scale your need as your users demand.

The other big cost to keep in mind is the staff you will need to maintain a hosting environment. If you do not have this skill set on your team or you can't afford to hire one, then leveraging the cloud provider or a Managed Care provider may prove to be a better option. But remember, these providers will help with basic networking and hardware trouble shooting. They will not be able to help you debug or fix complex issues within your application. For this, you'll need to provide the resources. It has been my experience that as a business grows, the cost of hosting a service at a Managed Care facility or in with a cloud provider exceeds the cost of a CoLo installation. It will be different for each business, but the monthly costs for servers begin to add up.

One final thought—I tend to believe that in the long run, CoLo is the most cost effective way of providing a hosted service. There are some intangible benefits of being so close to the delivery of your application that helps you with product design and performance. But there are some services that I think cloud providers could support that might tip the balance back to favor their level of service.

Two major costs to a SaaS provider are data backup and disaster recovery. A large portion of the cost to provide a hosted service go into maintaining backup copies of customer data, sometimes going back over a year. Leveraging the power of hundreds or thousands of customers, efficient and cost effective backup solutions could be provided at a fraction of the cost. The other area is in Disaster Recovery (DR). An effective DR strategy includes a second hosting facility, preferably in a different portion of the country and high speed, secure connections between the two facilities. A large provider should be able to provide this level of service as much lower rate than provisioning a second hosting facility on your own. This is not yet an area that cloud providers are focusing on, but I think it will be in the future.